The Price Of Power: Valuing The Controlling Position Of Owner-Managers In French Ipo Firms
Going public often creates an agency conflict between the owner-manager and minority shareholders. This problem is especially severe in countries with poor legal investor protection, such as France. We examine the controlling position of owner-managers in French IPO firms. We find that investors anticipate the increased agency conflict associated with a lock on control and lower firm value when the owner-manager is more powerful. Shareholder agreements in which the owner-manager agrees to share control with other pre-IPO owners enhance firm value. We also report that higher cash flow ownership by the owner-manager is positively related to firm value when he is not in full control. Finally, we document that the large (non-pecuniary) private benefits of control in France may motivate owner-managers to retain control after the IPO.
|Keywords||Ownership structure, going public, initial public offerings (IPOs)|
Roosenboom, P.G.J., & Schramade, W.L.J.. (2005). The Price Of Power: Valuing The Controlling Position Of Owner-Managers In French Ipo Firms (No. ERS-2005-011-F&A). ERIM report series research in management Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/1921